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VAT deduction under the real use method: the modalities for the electronic notification are known

As of January 1 2023, mixed taxpayers opting to exercise their VAT deduction right under the real use method will have to send a prior notification to the VAT Authorities according to art. 46, §2, al. 1 of the Belgian VAT Code.

This notification will be twofold:

  • Firstly, via the forms e604A or e604B respectively related to the start or change of VAT taxable activities
  • Secondly, via the communication of specific information foreseen under new art. 18bis, §2of R.D. n°3, at the time of the filing of the first quarterly VAT return (for a quarterly declarant) or of one of the three first monthly returns (in case of a monthly declarant)

Under this new procedure, the VAT Authorities will no longer notify any approval and this prior notification will be sufficient for the taxpayer to start applying the real use method as of the 1st day of the declaration period in which the notification was introduced.

Timing for the notification

This prior notification has to be made before the end of the period covered by the first declaration of the calendar year (ie. before 31.01 for monthly declarants and before 31.03 for quarterly declarants).

In case of start or change of activity giving a mixed status to the taxpayer, the notification has to be introduced before the end of the first declaration period following the start or change of activity.

This notification will be valid for an undetermined period as from 01.01 of the concerned calendar year or as from the first day of the declaration period following the start or change of the activity but will at least run until the 31.12 of the third year following the date of effect of the notification. Only after this period will the taxpayer be able to exercise again his deduction right under the general prorate method.

In case the taxpayer wishes to stop the application of the real use method, a notification is also to be introduced via the corresponding forms (ie. e-604A or e-604B). This will imply that the taxpayer is no longer allowed to apply the real use method as from the 1st January of the year following the notification.

Taxpayers already applying the real use method on 31.12.2022 also have to obligation to file this notification according to the same formalities before 01.07.2023.

Refusal and notifications from the VAT Authorities

As indicated here above, taxpayers do not need to wait for any approval from the VAT Authorities to exercise their deduction right according to the real use method. Only a confirmation receipt under .pdf format will be issued by the VAT Authorities based on the data registered by the taxpayers in the notification.

However, when the VAT Authorities consider that the notification does not meet the VAT neutrality principle, they still have the possibility to oppose themselves either to the application of this method either to the criteria determined by the taxpayer for its application. In such case, the VAT Authorities will have to issue a motivated notification of rejection. This motivated denial has to be notified to the taxpayer not later than the 31.12 of the year following the one within which the initial notification took effect. This denial applies retroactively as from the effect date of the initial notification from the taxpayer and for an undetermined period. The absence of such motivated notification within delay does not prevent the VAT Authorities to contest the application of the method by others means, such as during a VAT audit.

Mandatory application of the real use method

While mixed taxpayers wishing to opt for the real use method will have the obligation to file the electronic notification, the VAT Authorities will also have the possibility to impose its application. The VAT Authorities then have to notify their decision, motivation and date of entry into force (ie. first day of the declaration period within which the decision is notified or retroactively in certain circumstances) by registered mail.